AST members spend $2.5 million in latest IP3 round, but pass on $900 billion patent
06Feb18

AST has announced the results of its latest IP3 initiative which saw 15 of the defensive patent platform’s members participate, including Google, IBM, Microsoft and Ford.

In total they spent almost $2.5 million to buy 70 active assets in 19 portfolios with prices per lot ranging from $25,000 to $390,000; and an average selling price per family of $128,000. There was an average of 3.6 assets per family (up from 1.84 last year) with the largest lot that was acquired including 21 US patent filings (a lot could comprise multiple families).

Of the 19 portfolios that were acquired, 15 were handled by a broker or intermediary, with 12 lots from an NPE or patent holding company, three from practising entities, two from universities and one each from a law firm and individual inventor. More than half of the completed deals involved assets focused on communications (it also had the highest average price). Content delivery was the next most active sector with six deals.

Since it was launched by Google in 2015, and then adopted last year by AST, IP3 has aimed to give patent owners a quick and efficient means of selling their assets. They’re required to submit these for consideration along with an asking price. That sum is not open to negotiation, so sellers receive a simple yes or no on whether they have a deal.

This year saw a number of changes to the programme, with a focus on assets from just five sectors — communications, content delivery, Internet of Things, networking and wireless — and sellers given more time to determine what they were interested in selling and then to prepare their submissions.

On the buy side, those AST members who wanted to participate were able to wait until after sellers had made their submissions before deciding how much money to put into the buying process. According to AST CEO Russell Binns, the thinking behind this was to help members get internal buy-in so that they could participate. “We wanted (buyers) to get an easier approval process and I think it helps when they can point to particular assets they want to acquire,” he commented.

This second iteration of IP3 once again generated significant levels of interest among sellers with 640 submissions of assets for sale. Despite the longer submission period (which was open for two months in August and September 2017) the vast majority of sellers waited until the end to put their assets forward. “We had 400 of the submissions that came in on the last day of the submission window which just shows that people don’t want to lock up their patents for longer than they need to,” Binns revealed. “In the next round we’ll do much a shorter submission window but still give people plenty of lead time to make people aware of it.”

Binns indicated that he was not sure if the other big change — focusing on patents in just a handful of sectors — would continue in the next version of IP3. “Some of our members appreciate having fewer submissions to digest, it makes things their lives a little bit easier,” he said. “But then the more submissions you get if you have more categories that potentially gives you more overlap with additional members, possibly more money to spend and possibly more participation.” Binns suggested that for the next version they might broaden the focus but tell sellers which sectors they’re most interested in.

While they accounted for around 42% of the submissions, only three deals involving practising entities on the sell side were actually completed. That tends to reflect the greater number of hoops that patent teams within these busnesses have to jump through. “We’ve found that operating companies tend to need more negotiations, not just on price but on a lot of different terms of the contract so they tend to favour the standard selling process where they can take more time and negotiate more provisions that they may require,” Binns commented.

One approach that AST did use to try and drum up more interest from companies was to pre-negotiate certain provisions and Binns indicated that they would love to do more of that in the next IP3.

While it continues to generate a significant amount of interest among sellers, relatively few assets actually ended up being bought. One of the reasons behind that is a difference of opinion over just how much the assets submitted for sale are worth. “Though we really felt there was an increase in quality there was still a price mismatch in many cases so that sellers were looking for a higher amount than our members thought the assets were worth,” Binns explained.

As this blog has reported, one of the rights that sold was owned by Voice2Text Innovations LLC and featured in 2016 as one of the Electronic Frontier Foundation’s (EFF) “stupid patent of the month”. One grant that did not pass muster, though, related to an online coupon patent. It carried a price tag of $900 billion — or roughly $100 billion more than Apple’s current market cap. “You do get the occasional oddball like that,” Binns observed.

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